WEST PALM BEACH — For a retailer with little to cheer about, a decision by Florida’s Fourth District Court of Appeal was a home run for Sears, Roebuck & Co., overturning a lower court ruling in favor of Gardens Mall and the City of Palm Beach Gardens and paving the way for the store to sublease the second floor of its store to a sporting goods chain.
Sears has a lease with Forbes/Cohen Florida Properties for a store within the Gardens Mall, part of which the store attempted to sublease to Dick’s Sporting Goods.
The mall ownership balked at the agreement and turned to the city to seek a resolution requiring both the landlord and the city to agree to any subdivision of space within the Gardens Mall.
At the center of the case was Sears’ argument that the city’s resolution would unconstitutionally impair its contract rights and whether the resolution violates substantive due process because it has no criteria stating when approval to subdivide Sears’ leased space may be granted or denied.
According to the appellate court opinion, Sears’ appeal asked the court to consider whether the retailer was owed attorney’s fees as a result of the city’s alleged violation of substantive due process.
“Sears argues that the resolution passed by the city, at the prompting of Forbes, unconstitutionally impaired its contract rights,” the appeals court said in its decision. “We agree with Sears and find that the city’s resolution unconstitutionally impaired Sears’s right to contract.”
In its opinion, the court also concluded that the city’s resolution was unconstitutional because it impaired the retailer’s right to contract to sublease a portion of its store.
“Consequently, we find Sears is a prevailing party under 42 U.S.C. sections 1983 and 1988 and is owed attorney’s fees,” the appeals court held. “We further conclude that Sears has the contractual right to sublease without authorization from Forbes. The remaining issues are without merit and we affirm without comment.”
The court decision ends a five-year court battle between Sears and Forbes/Cohen.
The parties have a relationship that dates back three decades.
In 1987, Forbes entered into a sublease with Sears. That 30-year sublease gives Sears the option to extend its lease for four separate periods of 10 years each so long as Sears was not in material default and was operating as a retail store.
Additionally, the sublease also gives Sears the right to sublease any portion of the store.
In 2011, Sears began seeking a subtenant to sublease part of its two-story store and entered into negotiations with Dick’s Sporting Goods. Sears informed Sidney Forbes, a partner of Forbes, of its plans.
Without informing Sears, Forbes met with the city to discuss Sears’s plans, and personally requested that the city enact a resolution.
Forbes submitted a development application along with a $1,650 fee and then collaborated with the city in crafting the proposed resolution. The city passed Resolution 20-2012 as part of its consent agenda without taking any testimony.
The mall owners then told Sears it didn’t have the right to sublease to the sporting goods store.
For its part, the city maintained that it had sound rationale for enacting the resolution, claiming that it preserves the “form, function,and composition of the Gardens Planned Urban Development” and promotes “the health, safety and welfare of the public at large.”
Although the interests described may be a legitimate governmental interest, as noted in City of Miami Beach v. Ocean & Inland Co., the appeals court ruled that the resolution’s total lack of guidance would allow for arbitrary and capricious enforcement “having no substantial relation to the public health, the public morals, the public safety or the public welfare in its proper sense.”
In remanding the issue of the attorney’s fees back to the trial court, the appeals court noted that the trial court should, when calculating Sears’s fees, consider both the hours expended and the reasonableness of the hourly rate and “whether the expenditure of its counsel’s time was reasonable in relation to the success achieved.”